Question

Consider a perfectly competitive market for re-issue vinyl records, where market demand is given by ??(?) = ??? − ?? and market supply is given by ?? (?) = ??? + ??.

a. What is the equilibrium price for records?

b. Depict this market graphically. Fully label your graph, including the y-intercept and the equilibrium price and quantity.

c. What would happen to the market if consumers’ incomes increased? Illustrate the effect on the market graphically, and discuss how you would expect equilibrium quantity and price to change.

d. What would happen if, due to a recent resurgence in consumers’ interest in vinyl, entrepreneurs open up more record pressing facilities to compete with the existing producers? Illustrate the effect on the market graphically, and discuss how you would expect equilibrium quantity and price to change.

e. What would happen if the price of turntables (used to play vinyl records) falls? Illustrate graphically, and discuss how you would expect equilibrium quantity and price to change

Answer 1